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Sunday, September 17, 2006

Target moves, Costco snoozes

You snooze, you lose

Costco Fails Again in Bid for a Manattan Foothold

Published: September 17, 2006

For nearly a decade, Costco, the popular national wholesale club, has been trying to enter the lucrative Manhattan market. In the 1990’s, after encountering vocal opposition from local residents and politicians, Costco abandoned several efforts to open on the West Side — on 14th Street, 23rd Street or 55th Street — with a smaller model about half the size of its typical warehouse store.

Despite those failed proposals, which the company attributed to construction costs rather than community reaction, Costco had counted on being one of two anchor stores at East River Plaza, the long-stalled shopping center along Franklin D. Roosevelt Drive in East Harlem.

Costco, along with Home Depot, was part of the deal when the City Council approved the land-use plan for the 485,000-square-foot shopping center in 1999.

Last month, however, Jeffrey H. Brotman, Costco’s chairman, took a call at his headquarters in Issaquah, Wash., from Bruce C. Ratner and Edward Blumenfeld, the developers of East River Plaza. Target, not Costco, would open a 135,000-square-foot store on the second floor of the shopping center, and there was no chance for a counteroffer because the lease had been signed.

“I was really angry,’’ Mr. Brotman said. “From Bruce I didn’t expect it.’’

In blunt terms that retailers rarely use in public, Mr. Brotman said there was only one explanation for why his company lost the chance to lease space at the shopping center, which is scheduled to open in about two years. “It’s all about money,’’ he said. “That’s all it’s about.’’ Referring to Target, he said, “I suspect they didn’t care what they had to pay for entry into Manhattan.’’

But Mr. Blumenfeld’s son, David, who has shepherded the project since their company bought the site in 1994, said Costco was never able to close the deal because Mr. Brotman kept coming up with new issues to argue about, including the width of the parking spaces, the thickness of the floor, and the number of elevators.

“He was told numerous times: ‘We can’t wait. We’ve got to move this project along,’ ’’ Mr. Blumenfeld said. He said Costco was informed in February that if the deal was not completed in a month, a replacement tenant would be found.

“It wasn’t a rent issue,’’ Mr. Blumenfeld said. “It was about, ‘What is this project going to cost?’ ’’ It took only 45 days to negotiate the Target lease, he said.

Executives at Forest City Ratner, which is also the development partner in building a Midtown headquarters for The New York Times Company, declined to comment.

Target officials did not return telephone calls, but Peter Ripka, the company’s New York broker, said, “When retailers and developers are motivated to close out deals, things can happen very quickly.’’

The deal is simple. It was worth ANY PRICE for Target to beat Wal Mart into Manhattan. Target has needed to be in Mahattan for at least five years, Costco, not so much. But the cache Target needed to be in Mahattan, even among the Negroes, was such that any price was going to be acceptable. They want to make sure that their brand is established before Wal Mart can find a way into the city.

Target didn't give a shit about floor thickness or anything else. They wanted the space. That's it. And this is only their first store in Mahattan. They are going to make sure that Wal Mart does not get any chance at a foothold here.

What's the difference. While both are non-union, Target is a good corporate citizen and able to hide behind Wal Mart's insane anti-union ideology. So while Wal Mart will only open a New York store when they can hold a unionization drive, Target gets a pass.

Then there are the style issues. This, like the Pathmark on 125th St, is a bonanza for Manhattan north of 79th Street. That Target will look like a freaking UN. You'll have everyone imaginable shopping there. Target's cheap style appeals to a lot of people. Their store on Atlantic Ave. is the model for this.

But the other problem the famously blue Costco has is this: New York apartments are too small for bulk buying. A lot of what they sell isn't useful in the cozy New York apartment world, while Target's colorful kitchenware is a big attraction for people. And considering the location's access to transportation and highways, it's gonna be a popular place.

posted by Steve @ 1:18:00 AM

1:18:00 AM

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